Gold is for fools

Investing in jewelry is as ill-advised as collecting stamps and cars to make a quick buck, says Bharat Kewalramani

There are good, solid investments to be found out there – and then there's stupidity

The patrician rich sit at their mahogany dining tables, eating curry-rice with spoons and forks while muttering about the parvenu. They are commenting on the evening’s host for cocktails, who has shown them a battery of Persian carpets rolled up and stacked beneath the marital bed.

Having had the damn things for generations themselves, our patricians know that the value of the rugs lies in their being impervious to the puke stains of kids and grandkids, and can be used to take them flying as well. And also because they provide the perfect backdrop to show off the glossy black pearl of a young Labrador, and later to cushion his arthritic bones.

But the carpets must be in use, on a floor or shown on a wall. Rolled up, they rot and become mouldy in the monsoon. Seeing the nouveau riche scooping up these rugs as if they’re going out of style may make the connoisseur buy a few more to cover the bits of virgin floor left, or perhaps to swap for Kashmiri rugs in the second home. But buying in bulk is an investment horror unless one has a climate-controlled room with appropriate storage facilities.

This points to the problem with a number of alternative investments – that of physical storage and keeping them in good nick. Even if vintage cars turn out to be the investment of the century, your Benz ’34 150 may not sell for much because the underbody is a mass of rust. Cars need a lot of space, a dry climate and expensive maintenance periodically.

Besides necessarily being easy to maintain, alternative investments must stand the test of economics – restricted supply while demand remains unreasonable. Stamps could be the best example of this class of goods – they should become extinct soon enough. Another is ancient coins. Even debased ones can be great investments, which must have the ghosts of inflationary monarchs guffawing in their graves.

This proves that gold is for fools. Wear it as jewellery, by all means, but do not even think of it as a hedge against bad times – for when times are bad, gold cannot get you anything. There’s so much of it in India that, come a calamity, bangles will be melted by the kilo, and the exchange rate of gold into commodities will fall. And you can’t eat or drink gold.

To read the full article, check out the November issue of GQ India or subscribe.

Bharat Kewalramani is a venture-capitalist-turned entrepreneur with a great love of the sea